Refrigerants Australia executive director Steve Anderson reviews the impact of the carbon tax one year after its introduction. He warns that removal of the tax needs to be much more considered than its introduction. Its removal should be gradual to avoid further disruption to industry.
So, one year on and you'd have to admit that the sky hasn't fallen in.
The industry has absorbed a massive financial hit, and for what?
Well, despite the price increases, people are still buying refrigerant.
More equipment designed to handle flammable refrigerants, such as R32, are being introduced into the Australian market, and other changes are on the way.
There is some anecdotal evidence that more effort is going into leak prevention, and similar talk around increased recovery and reuse.
Unfortunately, anecdotal evidence is all we are likely to get.
The tax was introduced without any estimates of the reduction in emissions it was intended to produce, and it now seems we will never learn for certain how effective or ineffective it would have been.
But it would seem that, sometime after its introduction, at least in some government quarters, doubts were being belatedly raised.
According to government emissions projections released late last year, for refrigerants "emissions are projected to peak in 2015 then remain relatively stable to 2030, with or without the carbon price."
A small amount of domestic abatement is expected from the carbon price (0.2 Mt CO2-e in 2020 and 0.4 Mt CO2-e in 2030) as it creates incentives to use halocarbons more efficiently and to destroy or recycle them.
So now you know. all that for a small amount of domestic abatement.
A Coalition government, which looks almost a certainty on September 14, has pledged to make the removal of the carbon tax its first priority.
While many in industry have enthusiastically supported this move, there is a growing fear that the cure may be worse than the disease.
What would the overnight removal of the tax mean for the industry?
When the tax was introduced, it was massively unpopular – "no carbon tax under any government I lead" is probably one of the best-known quotes in modern Australian politics.
However, it now seems that the industry has absorbed it, so throwing the tax out overnight may come with its own unintended consequences.
Make no mistake – the overwhelming majority of the industry is opposed to the tax.
At best it is a very expensive way to generate what is likely to be a very small reduction in emissions. A fact the government is ignoring.
A fraction of the tax take – which goes straight into consolidated revenue – could have been spent on training, practical emissions reduction programs and enforcement.
This would have delivered a far greater environmental benefit at a fraction of the cost, while also building a more professional industry.
So just what are these possible unintended consequences? The sudden removal of the tax would massively devalue all stocks of refrigerant in Australia in both bulk and in equipment.
Knowing this is coming, companies will run down stocks to the lowest feasible levels. This is likely to result in enormous disruption to the distribution network.
In an emergency at say a supermarket or a hospital, it is unlikely that the contractor will have an adequate supply of refrigerant on hand, but when he goes to the local wholesaler, they may not have adequate supplies on hand either.
No doubt they could then source them from somewhere else, but the clock is ticking, the stock is spoiling, the patients' health is suffering.
The disruption does not end there. This industry is characterised by a significant small business presence.
With significant decreases in the price of
refrigerant anticipated, companies will delay having new work and maintenance done in anticipation of cheaper prices.
This would mean significant delays and decreases in work flows for contractors – in fact for a time in some areas work could dry up. This feeds back into other sectors of the industry: equipment sales become much more lumpy, wholesalers sales become erratic.
I don't know anyone who does not believe that we must reduce our greenhouse gas emissions, or that this industry is not well placed to make a useful contribution in that area.
We have long argued that the carbon tax was, as far as the air conditioning and refrigeration industry is concerned, simply the wrong policy instrument, something designed to deal with waste gases, not a purpose-manufactured and largely price-inelastic product like refrigerants.
Whatever emissions it has reduced are likely to be massively expensive and that money could have produced much more significant emissions reductions in targeted programs developed with the industry.
But that was not to be, and the tax is in place. Its removal needs to be much more considered than its introduction.
What is required is a staged and gradual removal, a phase-out rather than a throw-out.
In coming months the industry needs to engage with the Opposition to develop a plan for the removal of the tax, without any avoidable disruption and dislocation.
